You have recently been appointed as a Chief Financial Officer in BP plc and have realised that the board of directors require in-depth understanding of Conceptual Framework for Financial reporting, Disclosure requirements and IFRS 15 (Revenue from contracts with customers).
a. They are aware that the international Accounting Standards Board (IASB) and the FASB have done extensive work in improving existing frameworks and converging them into a common framework, leading to the current Conceptual Framework for financial reporting. Write a report to the Board critically discussing the need to develop an agreed international conceptual framework and the extent to which it can be used to resolve practical accounting issues.
b. The Board members are also divided on the concept of “Disclosure”. They are all advocates of an overarching framework that will make financial statement disclosures more effective. However, majority of them believe that excessive disclosure is burdensome and can be ineffective for users. Whiles the others believe that there is no such thing as excessive information for users. i. Critically evaluate the need to ensure optimal level of disclosure in annual reports, discussing the reasons why users of annual reports may find disclosure to be excessive in recent years.
ii. Discuss the barriers BP plc may face in a bid to reduce excessive disclosure in their annual reports
c. The introduction of IFRS 15 (Revenue from contracts with customers) have had a significant impact on the financial statements of many companies including BP plc. IFRS 15 significantly reduces the entity’s discretion to apply judgement when recognising revenue. Supporters argue that it is an improvement on the old revenue standards, which provided limited revenue recognition guidance and led to divergence in practice.
i. You are required to critically discuss in your report the main weaknesses in the old revenue standards which led to the introduction of IFRS 15 (Revenue from contracts with customers).
ii. Critically evaluate the ways in which IFRS 15 attempts to remedy the disadvantages of the previous standards on revenue.